This is exactly what I want most of the time. My ISP's servers are usually in neighboring cities, so geoip isn't precise enough, but GPS is too precise for my needs. I just want to disclose what city I'm in. This is enough info to give me useful results (e.g. I search Google for "italian restaurants", it gives me results for my city first) without violating my privacy by giving Google my location habits. Maybe OSes could give an option to reduce the granularity of the location reported, so you could disclose the town or state, but not the exact street, for instance.
When it comes to things such as entertainment, regional rights restrictions probably have more to do with that than the app wanting to spy on you. I'm not saying this is right. Just saying how the lawyers have sliced things into pieces like that.
I think they want to know you are where you say you are. You'll find if you travel out of the area -- particularly out of the entire country -- you won't have access to entertainment you had while at home due to these regional restrictions. Just think of the times when you've gone to the BBC website to view a video only to be told you can't have it outside of the UK (the BBC license area). (Note that I'm assuming you're in the US although your use of "postal code" likely means you aren't.)